What does the term "ceteris paribus" mean?

The term "ceteris paribus" is a Latin phrase that translates to "other things being equal" or "all other things held constant." It is commonly used in economics to isolate the relationship between two variables by assuming that all other variables remain unchanged. This allows economists and analysts to better understand the specific effects of changing one variable on another without the influence of external factors.

For instance, when discussing the price of a good and its demand, economists may state that demand will increase if the price decreases, ceteris paribus. This means they are assuming that no other factors, such as consumer income or preferences, are affecting the demand during the analysis.

Understanding this concept is crucial in economics, as it helps simplify complex relationships and allows for clearer analysis of how one variable impacts another in isolation.